Our marine division, led by Clive Washbourn, delivered another excellent performance in 2010, achieving a combined ratio of 71% (2009: 74%) on gross premiums of $261.7m. The team is among the most experienced at Lloyd’s, leading 53% of business underwritten and covering risks that include marine hull, liability and cargo; energy; and war and terrorism risks for both ships and aircraft. Within our liability account, we have a growing book of professional liability business, protecting organisations involved in marine trade and in shipbuilding – from marine surveyors to shipyards – against financial liability arising from a breach of their professional duties.
Our marine hull and cargo underwriters had a successful year, despite a depressed freight market. Global demand has been stronger in the bulk transport sector, where we have focused, than in the containerised sector. Risk selection is ever more important: as economic pressures on ship owners have risen, some have cut expenditures on upkeep sharply, resulting in more breakdowns. Our ship construction portfolio has also shrunk as fewer ships with smaller contract values have been ordered.
War risks business, which includes piracy risks on maritime trade routes, has remained profitable and demand is high. Lloyd’s is by a large margin the world’s pre-eminent market for marine war risks and we play an active role in this market, offering expert consulting and negotiation services to our clients as well as insurance cover.
In the energy market, premium rates remain strong, having risen by 9% in the Gulf of Mexico following the Deepwater Horizon oil rig explosion in April. Deepwater Horizon was not a large loss for us but its effect on pricing in the market has been significant. Our Oslo office, which we opened at the beginning of 2010 to access Scandinavian energy business that is normally retained in the local market, wrote $4.2m of premium during 2010.
In addition to our London presence, we now have four regional offices in the UK, focusing on cargo business, as well as the office in Oslo and an office in Hong Kong. Our Hong Kong office has been successful in developing our position in the Asian cargo market; in the UK our portfolio has been slower to develop and a focus of the team in 2011 will be to strengthen broker relationships to access a larger share of this business.
In 2009 we established a new team focusing on marine professional liability risks under Zareena Hussain. This is not business that has historically been insured at Lloyd’s and we are delighted to be playing a role in developing the market. The strength of Beazley’s specialty lines division in non-marine professional liability, where we are a recognised market leader, has proved a source of credibility and valuable broker introductions to the team. At the end of the year, we put Zareena and her team in charge of our entire marine liability book.
Our claims capabilities are critical to our reputation in the eyes of both brokers and clients. In our market, insureds and insurers have an important shared interest at the time a claim is made. The more rapidly the claim is reported and adjusted, the sooner the insured will be paid and – often – the lower the overall cost of the claim will be. We pride ourselves on settling valid claims swiftly.